The movie begins with the pesky social worker, Miss Finch, deciding that Big Bird belongs with a family of birds in Illinois. Big Bird is hesitant to leave his home of Sesame Street, but after being convinced by his friends that it could be a fun adventure, he agrees to go.
Upon arriving in Illinois, Big Bird is welcomed by the Dodo family and their birdhouse, but he quickly realizes that he doesn't belong there. He misses his friends and the familiar surroundings of Sesame Street. He attempts to fly back to Sesame Street but gets lost along the way, leading him to run away from the Dodo family and back onto the road.
As Big Bird wanders aimlessly, his Sesame Street friends become worried about him and begin to search for him. They eventually come across a carnival where they believe Big Bird may be performing. However, they soon discover that he is not there and continue their search.
Throughout their journey, the Sesame Street gang has many comical encounters, including a run-in with a group of Cabbage Salesmen and a car chase with Miss Finch. Eventually, they receive a clue that Big Bird may be in a junkyard in the middle of nowhere.
When they arrive at the junkyard, they find Big Bird about to be sold as an attraction in a circus. The Sesame Street gang, with the help of some friendly construction equipment, manages to rescue Big Bird and bring him back home to Sesame Street.
In the end, Big Bird learns that he belongs with his Sesame Street family and that there's no place like home. The movie concludes with a big song and dance number with all the Sesame Street characters celebrating their happy reunion.